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December 2017

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LOJAS RENNER S.A., the second largest apparel department store in Brazil, announces its results for the fourth quarter (4Q10). In 4Q10, certain reclassifications have been made to the income statement accounts to better reflect the essence of operations in line with BRGAAP and IFRS principles.

Highlights of the Period

• The Company's Total Net Revenue was R$ 899.8 million in 4Q10, a growth of 15.5%.
• Net Revenue from Merchandise Sales was R$ 823.7 million, equivalent to a growth of 15.7%. Same Store Sales were +10.0%, in 4Q10.
• Gross Profit from Merchandise Sales reached R$ 420.7 million in 4Q10 and Gross Margin from Retailing Operation was 51.1%. Excluding the effect of reclassifications, Gross Profit would be R$ 405.0 million and the Gross Margin, 49.2%.
• Operating Expenses (selling, general and administrative) reported R$ 259.9 million in 4Q10. Excluding the effect of reclassifications, this item would be R$ 251.7 million.
• Result from Financial Services was R$ 33.5 million in 4Q10, a growth of 73.9%. Excluding the effect of reclassifications, this item would have reported R$ 40.2 million in 4Q10.
• 4Q10 Renner Card Losses, considering the reversal of provisions in the period, represented 1.5% of merchandise sales.
• 4Q10 EBITDA was R$ 178.3 million, equivalent to an EBITDA Margin of 21.6%. Excluding the effect of reclassifications, EBITDA would be R$ 183.0 million, or equivalent to an EBITDA Margin of 22.2% in 4Q10.
• The Company ended 4Q10 recording Net Income of R$ 123.2 million against R$ 100.3 million in 4Q09, registering a growth of 22.8%.

Results from the retail operation

Net Revenue
Net Revenue from Merchandise Sales was R$ 823.7 million in 4Q10, against R$ 711.9 million in 4Q09, a growth of 15.7%. Same Store Sales increased 10.0% compared to 4Q09. Contributing to the performance in the period was an improved inventory mix compared with the same quarter in 2009.

The macroeconomic scenario also reported positive indicators for formal employment and higher consumer confidence levels. If it had not been for the unseasonably low temperatures in October and November, the Company would have reported an even better net revenue result.

Net Revenue per m2 posted growth of 6.3% from R$ 2,863 per m2 to R$ 3,044 per m2 in 4Q10.

Gross Profit
Gross Profit from Merchandise Sales was R$ 420.7 million in 4Q10 against R$ 365.0 million in 4Q09, translating into a growth of 15.3%. Gross Margin from Retailing Operation was 51.1% in 4Q10, slightly below the 51.3% for the same quarter in 2009. If the effect of reclassifications are excluded, Gross Profit from Merchandise Sales would be R$ 405.0 million in 4Q10, against R$ 347.0 million in 4Q09 and Gross Margin in 4Q10, 49.2% against 48.7% in 4Q09. Even with the persistent cold weather in October and November, the margin increased in 4Q10. The difference to the post reclassification figures is basically due to the lower volumes of advertising values received from suppliers.